Claiming Tax Deductions

Q: DEAR BOB: Is a foreign national who has lived three years in his principal residence, paying U.S. taxes with a Social Security number but without a green card, entitled to claim the $250,000 or $500,000 home-sale tax deduction?

-- Gloria S.

A: DEAR GLORIA: Yes. Immigration status doesn't matter as long as the foreign national has held title to the principal residence at least 24 of the 60 months before its sale and has occupied it for that time. Up to $250,000 in principal-residence sale profits are then tax-free for a single home seller.

If the principal-residence owner is married, and the spouse meets the occupancy time test but is not on the title, up to $500,000 in principal-residence-sale capital gains are tax-free, thanks to Internal Revenue Code 121. A joint tax return must then be filed in the year of the home sale.

DEAR BOB: After my divorce I had my former husband's name taken off everything, but the title company refuses to take his name off the house. What can I do?

-- Kellie W.

DEAR KELLIE: To get your former husband's name off the title to real estate, he must sign a quitclaim deed to you. If he refuses to do so, his name remains on the title. The title company can't do anything without his properly notarized quitclaim deed signed by him. Your divorce attorney should have insisted on receiving this document as part of the divorce proceedings.

DEAR BOB: When I recently applied online for a home equity loan, the lender wanted to charge me a loan origination fee, appraisal fee, credit report fee, processing fee, underwriting fee, flood certification, funding fee, $100 escrow settlement fee, $150 title fee, $15 courier fee, $15 wire fee, $75 recording fee, $80 intangible tax and $235 mortgage tax. What is your evaluation of these charges for a home equity loan?

-- Marydelle P.

DEAR MARYDELLE: Most of those are unnecessary fees you should not pay. Virtually every local bank and credit union will eagerly make you a home equity loan or home equity credit line without any such "junk fees" if you have a Fair Isaac and Co. score of about 700 or higher.

I have obtained many home equity credit lines over the years from major lenders, such as Chase and Wells Fargo, without paying any upfront junk fees such as those you list. The only legitimate home equity loan fees on your list that I wouldn't resist are the local mortgage tax, the intangible tax and the recording fee. The other charges you list should be absorbed or paid by the home equity lender if it wants your business.

DEAR BOB: I have been an independent mortgage broker for more than 20 years. My business comes from satisfied former borrowers and real estate agents who know I will treat their home buyers right. If I can't arrange a mortgage for a specific situation, I tell the prospect quickly and we part as friends. Often, I know of "secret lenders" who will make mortgage loans not available elsewhere. However, I always reveal the borrower's costs upfront, never imposing any last-minute unnecessary fees as some competitors do. -- Jonathan C.